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Crossed the finishing line

I'll be back helping Lucy on Monday, hopefully in a cheery mood following a big Wallabies victory tonight.

Hope to see you then.

David

4.31pm on Oct 11, 2019

Solid gains

Helped by renewed optimism towards the prospects for a US-China trade deal and breakthrough in Brexit negotiations, Australian shares rose strongly to end the week, propelled higher by strong gains in miners, banks and healthcare stocks.

The benchmark S&P/ASX 200 index rose 59.7 points, or 0.9 per cent, to close at 6606.8, ending what was a wild week for investors on a positive note.

Mirroring the performance of the broader index, all sectors aside from industrials finished higher for the session.

Helped by strong gains in commodity markets, resources surged 1.4 per cent, closely followed by healthcare and materials with gains of 1.3 per cent. Telecommunications and energy also added 1.2 per cent apiece, the latter helped by a rally in crude oil prices on Thursday.

Financials also chipped in with a gain of 1.1 per cent, benefiting from a strong lift in global bond yields as risk appetite improved.

Gold miners were hit by falling bullion prices and improved investor mood with the All Ords gold index sliding 1.2 per cent.

By individual stock, gold miner Silver Lake Resources logged the largest gain on the benchmark index, soaring 12.5 per cent to $1.035 following a positive production update. Financial services platform provider Netwealth Group finished at the other end of the scoreboard, slumping 5.5 per cent to $8.69 following a broker downgrade from UBS.

The broad-based gains on Friday helped the S&P/ASX 200 lift 1.4 per cent for the week, logging its first increase in three. Healthcare and telecommunications led the gains, jumping over 3 per cent. Information technology added 2.4 per cent while industrials rose 1.9 per cent.

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3.49pm on Oct 11, 2019

RFG capital raising

Troubled food retailer Retail Foods Group has announced a $160 million capital raising to repay debt, strengthen its balance sheet and provide working capital, according to a statement filed with the ASX.

Shares in the company were placed in a trading today as it prepared to issue 1.5 billion ordinary shares at 10 cents a pop, some 41 per cent below where it last traded.

The company said it also plans to raise a further $10 million through a share purchase plan at the same price. It said this could be increased to a maximum amount of $20 million.

The bookbuild for the capital raising opens today and is scheduled to close on October 14.

3.16pm on Oct 11, 2019

Top and bottom performers

A quick look at the top and bottom performers on the ASX 200 today.

The ASX 200 is up 0.8 per cent to 6600.8 with resources, healthcare and energy continuing to outperform the broader index. Financials, helped by a further lift in Australian bond yields, is also up close to 1 per cent. REITs and industrials are down by 0.2 per cent or less.

3.08pm on Oct 11, 2019

Trade talks reaching a crescendo

In contrast to yesterday when the trade headlines were flowing thick and fast, there’s been a relative dearth of news flow in Asia today.

However, there has been one major development.

Helping to further ease concerns about an early departure by the Chinese trade delegation, it has been confirmed that Donald Trump will meet with Chinese vice premier Liu He at 2.45pm in Washington today.

In the absence of a major disagreement between the two sides, the chance of a partial trade deal appears to be growing. Whether it’s a major breakthrough – such as a roll-back of tariffs or similar - remains very debatable.

2.43pm on Oct 11, 2019

Netwealth downgrade

After surging 3.5 per cent on Thursday following its September trading update, shares in financial services platform provider Netwealth have given back all those gains, and then some, on Friday.

Shares in the company are off 5.5 per cent to $8.69, making the company the worst performer on the ASX 200 for the session.

In a note released yesterday, analysts at UBS downgraded their rating on the stock from neutral to sell citing the risk of intensifying margin pressures.

“We continue to allow for a 12 per cent reduction in average platform revenue margins to 42.4 basis points in FY20,” UBS said. “However, we see growing risks to cash spread margins should the RBA cut cash rates to below 50 basis points. We estimate a 25bps RBA cash rate could impact NWL's EPS by up to 9 per cent all other things equal.”

Despite the ratings downgrade, UBS has upped its price target for the stock to $7.50, 25 cents above its previous forecast.

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2.28pm on Oct 11, 2019

Ice-cold inflation tipped

Australia’s September quarter inflation report will be released at the end of the month. UBS expects it’ll be another ice-cold outcome, leaving the RBA little choice but to cut rates again in November.

In a note released today, the UBS Australian economics team said the ABS’ trimmed mean inflation measure – the RBA’s preferred for gauging underlying inflationary pressures – will fall to a record-low annual pace of just 1.5 per cent.

“This marks a record long 15 quarters below the RBA's 2-3 per cent target, and again a tick below the RBA's 1.6 per cent forecast,” UBS said.

Given recent weakness in retail spending, despite tax and income tax already introduced, UBS expects the RBA will be forced to revise down its economic growth forecasts when released next month, paving the way for further monetary policy easing given the implications for hiring and the unemployment rate.

“This means the RBA will find it even harder – with current policy – to achieve their [unemployment and inflation objectives]. while significant policy stimulus is here – including tax cuts & rate cuts – it's not enough.”

UBS says it will likely require underlying inflation to come in hotter than it expects in order to prevent the RBA from easing policy settings again on November 5. It eventually sees the cash rate falling to 0.25 per cent in the first half of next year unless the recent housing market recovery “takes off”.

2.12pm on Oct 11, 2019

Economists not convinced about a November rate cut

While financial markets currently regard a 25 basis point rate cut from the RBA in November as a flip of a coin, economists aren’t so confident. According to new forecasts released today, just four of the 21 surveyed by Bloomberg expect the cash rate will be reduced to 0.5 per cent at this meeting.

Those who expect a rate cut include AMP Capital, Morgan Stanley, Nomura Australia and UBS.

The outcome of trade talks between the US and China scheduled to end today, along with next weeks Australian jobs report, appear the most likely catalysts to change current market and economist views.

On the latter, economists expect Australia’s unemployment rate remained unchanged at 5.3 per cent in September. The median forecast looks for employment to increase by 14,000, down from 34,700 in August.

2.06pm on Oct 11, 2019

Aussie not battling today

The Chinese yuan is gaining ground against the greenback on Friday, dragging the Aussie dollar along for the ride.

The onshore yuan, or CNY, currently sit at 7.1003 per US dollar, up 0.2 per cent from where it closed on Thursday. The cross rate had been as high as 7.1515 earlier this week.

On Thursday, Bloomberg reported that US officials were considering offering a currency pact to China in order to delay a planned increase of tariffs scheduled to kick in next week.

The news not only saw the yuan rally against the greenback but helped to rekindle optimism that a partial trade deal between the two sides could be reached.

Given the close economic ties between the two countries, and the improvement in risk appetite that helped commodity prices bounce overnight, the strength in the yuan has flowed through to the Aussie dollar which has continued to gain in Asian trade today, lifting 0.2 per cent to 67.77 US cents, leaving it at a fresh two-week high.

Bunnings buys tools

By Dominic Powell

Hardware and tools giant Bunnings has entered into an agreement to purchase 70-year-old family business Adelaide Tools for an undisclosed sum.

Based out of Keswick in South Australia, the local hardware and DIY retailer operates five stores across the state, along with a lawn mower centre in Somerton and an online store.

Bunnings managing director Mike Schneider said the acquisition, which is still subject to regulatory approval, would help the Wesfarmers-owned retailer accelerate growth in its trade business and better engage with trade customers.

“While our businesses are very different, we see strong alignment between the Adelaide Tools and Bunnings brands with both businesses having a strong focus on team, advice and service – we believe this acquisition will deliver even more choice and convenience for trade customers," he said.

Shares in Bunning's parent company Wesfarmers have risen 0.8 per cent to $39.27 on Friday.